Initial Placing, Offer for Subscription & Placing

RNS Number : 6412P

Ediston Property Inv Comp PLC

09 June 2015

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, AUSTRALIA, NEW ZEALAND OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS.  THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, ANY OFFER FOR SALE OR SUBSCRIPTION OF, OR SOLICITATION OF ANY OFFER TO BUY OR SUBSCRIBE FOR, ANY SHARES IN EDISTON PROPERTY INVESTMENT COMPANY PLC OR SECURITIES IN ANY OTHER ENTITY, IN ANY JURISDICTION, INCLUDING THE UNITED STATES, NOR SHALL IT, OR ANY PART OF IT, OR THE FACT OF ITS DISTRIBUTION, FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY CONTRACT OR INVESTMENT DECISION WHATSOEVER, IN ANY JURISDICTION.  THIS ANNOUNCEMENT DOES NOT CONSTITUTE A RECOMMENDATION REGARDING ANY SECURITIES.

ANY INVESTMENT DECISION MUST BE MADE EXCLUSIVELY ON THE BASIS OF THE FINAL PROSPECTUS TO BE PUBLISHED BY THE COMPANY AND ANY SUPPLEMENT THERETO IN CONNECTION WITH ADMISSION.

To:       RNS

From:   Ediston Property Investment Company plc (the "Company")

Date:    9 June 2015

PROPOSALS FOR THE ISSUE OF NEW SHARES BY MEANS OF AN INITIAL PLACING AND OFFER FOR SUBSCRIPTION AND PLACING PROGRAMME

AND

PUBLICATION OF CIRCULAR

Introduction

On its launch in October 2014 the Company raised £95 million and immediately acquired an initial property portfolio of five properties for a gross consideration (including costs) of approximately £80 million. Since then the Company has arranged and drawn down a £40 million loan facility and has acquired two properties, and is in advanced legal negotiations to acquire a third property, for an aggregate consideration of approximately £35 million.  As a result, the Company has invested, or committed to invest, approximately £115 million funded by the gross proceeds raised on its launch and through its term loan facility.  Ediston Properties Limited ("Ediston"), the Company's investment adviser, continues to identify attractive acquisition opportunities which it believes would benefit the Company's portfolio.

The prospectus on the launch of the Company stated that, once the Company's available cash reserves had been largely committed to new investments, the Board intended to explore opportunities to increase the size of the Company through further equity issues. 

The Board has been advised that there is strong demand from existing and prospective investors to acquire further equity in the Company.  Ediston, believes that it will be able to invest additional equity proceeds in attractive investment opportunities that will further diversify the Company's property portfolio. Accordingly, the Directors believe that it would be in the best interests of the Company to raise further equity share capital and to do so in such a way as to minimise cash drag on Shareholders' funds and to give existing Shareholders the chance to participate in the issue of new equity, if they wish to do so. 

The Proposals

The Board is proposing to raise additional monies by means of an initial placing and an offer for subscription of up to 40 million New Shares and a 12 month Placing Programme thereafter.  The purpose of the subsequent Placing Programme is to provide the Company with the ability to raise additional capital to invest in future investment opportunities as they arise whilst minimising the impact of cash drag on the Company's returns.

Accordingly, the Board is now seeking shareholder approval to allow it to undertake the Initial Placing and Offer of up to 40 million New Shares in full, on a non pre-emptive basis. In so far as such authorities are not fully used, they will then be available to issue New Shares under the Placing Programme.  Such authorities will be in addition to the existing, but unused, authorities to issue up to approximately 9.5 million Shares on a non pre-emptive basis obtained at the annual general meeting held on 24 March 2015. Once these authorities have been exhausted, the Company will, if it is appropriate to do so, convene further general meetings to seek Shareholder approval for the allotment and disapplication of pre-emption rights on further New Shares for use under the Placing Programme.

Details of the Proposals

The Initial Placing and Offer for Subscription

New Shares will be issued under the Initial Placing and Offer at a premium to the net asset value per Share as at a fixed date prior to the end of the offer period.  The Investment Adviser has identified a pipeline of potential acquisitions to invest the net proceeds of the Initial Placing and Offer in accordance with the Company's investment policy.

The full terms of the Initial Placing and Offer and how investors can apply for New Shares under them will be contained in the prospectus (as described below). Existing Shareholders will be given priority over other applicants where applicable and as far as reasonably possible.

The Placing Programme

The Company is also proposing the Placing Programme to enable the Company to raise additional capital in the 12 month period following the publication of the prospectus (as described further below) when the Investment Adviser identifies properties that are suitable for investment.  This should enable the Company to raise the  equity needed to make a series of acquisitions over the 12 month period thereby reducing the impact of cash drag on Shareholders' funds.

The Prospectus

The Company intends to publish a prospectus in relation to the admissionof up to a total of 150 million New Shares under the Initial Placing, the Offer and the Placing Programme. The prospectus, and the Placing Programme, will remain in force for a period of 12 months from the date upon which the prospectus is published.

The Issue Price

The price at which the New Shares are issued will be set by the Board at a premium to the most recent net asset value per share.  The premium will be intended to cover the direct costs of issue and will seek to contribute to the financial impact of investing the proceeds.  The Issue Price will also take into account the prevailing price of the existing Shares in the market.

Reasons for and benefits of the Proposals

The Investment Adviser has largely deployed the existing capital available to the Company and has made good progress on enhancing the asset value of the initial property portfolio through active asset management. The Investment Adviser has identified good investment opportunities into which the Company could invest, if more capital was available.  There is demand for the Company's shares, as demonstrated by the premium to net asset value at which the Shares have been trading.

As indicated in the investment outlook section below, the Board believes that the current market environment is positive for both raising new money and deploying the capital in accordance with the Investment Adviser's style of investment.

Consequently, the Board and its advisers have structured the Proposals to provide a means of raising more equity capital as it is needed thereby minimising cash drag.  The Proposals have also been structured to ensure that all existing Shareholders, as well as new investors, have an opportunity to participate.

The structure of the Proposals also provides the ability to introduce borrowings, from time to time, against the tranches of equity issued.

The Proposals should substantially increase the size of the Company's issued share capital, which in turn will give a bigger equity base over which to spread fixed costs and provide for more secondary liquidity in the Company's shares.   As the proceeds of the Issues are invested the Proposals will also help diversify the portfolio and enhance the potential, over the medium to longer term, of achieving an attractive level of income together with the prospect of income and capital growth in accordance with the Company's investment objective and policy.

Investment outlook

The Board believes that an investment in the Company offers an opportunity to achieve attractive investment returns through exposure to the UK commercial real estate market. Strong economic fundamentals support a property sector offering yields at above average margins over government bonds in an environment with a limited supply of new space across all sectors.

The volatility and uncertainty over recent years in the UK real estate market has been replaced over the last 12 months with a macroeconomic picture which is more positive than it has been for some time.  Rental growth is highly correlated to GDP growth but tends to lag the economic turning points by some 12 to 18 months.  This lag is now unwinding with tenant take-up pushing vacancy levels to the point that rents are now rising outside London.  This is also against a back drop of relatively modest development activity which is likely to keep vacancy rates at low levels.  With this outlook returns should remain positive and possibly be enhanced by a further fall in yields.  However, it is likely that the next phase of the property cycle will be characterised by a greater proportion of returns from income and the ability to grow rents.

The Board believes that the market environment remains sufficiently attractive to support raising new capital to assist the Company to grow and achieve its investment objectives.  The Board also believes that the market conditions are especially conducive to the skill set of the Investment Adviser where careful stock selection coupled with innovative and creative asset management, should add further to Shareholders' returns.

Dividends

It is the Directors' intention to continue to pay an attractive level of dividend income on a monthly basis. Whilst not forming part of its investment policy, and subject to market conditions and the Company's financial performance, position and outlook,  the Company targets an annual dividend of not less than 5.5p per Share. This level of dividend is expected to be covered by the Group's net income over the medium term on the assumption that the Company's available cash reserves are fully invested, including the proceeds of the Issues and available borrowings.

The New Shares issued under the Initial Placing and Offer will not qualify for any dividends in respect of the period prior to 1 July 2015 but otherwise will rank pari passu with the Ordinary Shares.

Borrowings

The Company has recently put in place a £40 million ten year term loan facility which has been fully drawn down. The interest rate on the loan has been fixed at 3.09 per cent. for the duration of the loan.  The Group's gearing, at the time of drawdown, represents approximately 29 per cent. of the Group's gross assets and is in accordance with the Company's investment policy.

The Board intends that additional debt facilities be put in place and that further borrowings  be drawn down to maintain the proposed gearing level of approximately 30 per cent. of gross assets if appropriate to do so.

Your Board

It was with great sadness that the Board announced the death of Ratan Engineer in April.   Ratan was chairman of the Company from its launch last year and served with distinction.  The Board intends to seek an appropriate additional non-executive director in the coming months.

Recommendation

The Directors consider the passing of the Resolutions set out in the notice of the General Meeting at the end of the Circular (as described below) to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. 

The Directors intend to vote in favour of the Resolutions in respect of their own beneficial holdings of Shares (amounting to 40,000 Shares, representing approximately 0.04 per cent. of the issued share capital of the Company).

The General Meeting

The Proposals are conditional, inter alia, on the approval of Shareholders.  The General Meeting is to be held at 10 a.m. on 2 July 2015 at 16 Charlotte Square, Edinburgh EH2 4DF.

Circular

A circular explaining the details of the Proposals, the reasons for and the benefits of the Proposals and convening the General Meeting (the "Circular") will shortly be sent to shareholders. A copy of the Circular will shortly be submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.

For further information please contact:

Ediston Properties Limited Danny O'Neill Calum Bruce Rankin Laing	0131 225 5599
Canaccord Genuity Limited Will Barnett Neil Brierley Dominic Waters Robbie Robertson	020 7523 8000

Important notices

Canaccord Genuity Limited and Dickson Minto W.S., each of which is authorised and regulated in the UK by the Financial Conduct Authority, are acting exclusively  for the Company and for no-one else in connection with the contents of this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to the respective clients of Canaccord Genuity Limited and Dickson Minto W.S., or for affording advice in relation to the contents of this announcement or any matters referred to herein. 

No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by any member of the Company's group, Canaccord Genuity Limited or Dickson Minto W.S. or any of their respective directors, officers, employees or agents.  Subject to the Listing Rules and/or the Prospectus Rules and/or the Disclosure and Transparency Rules and/or the Takeover Code and/or FSMA, neither the delivery of this announcement nor any subscription or acquisition made under it shall, in any circumstances, create any implication that there has been no change in the affairs of the Company group since the date of this announcement or that the information in it is correct as of any subsequent date.

This announcement is for information only and does not constitute or form part of any offer or invitation to issue, acquire or dispose of any securities or investment advice in any jurisdiction.

DEFINITIONS

The meanings of the followingterms shall apply throughout this announcement  unless the context otherwise requires.

Act	Companies Act 2006 (as amended)
Board or Directors	the directors of the Company
Company	Ediston Property Investment Company plc, a company incorporated in England and Wales with registered number 9090446
Form of Proxy	the form of proxy for use by Shareholders in connection with the General Meeting
General Meeting	the general meeting of the Company to be held at 10 a.m. on 2 July 2015
Group	the Company and any direct or indirect subsidiary of the Company from time to time
Initial Placing	the conditional placing of up to 40 million New Shares (in aggregate with the Offer) by Canaccord Genuity Limited
Investment Adviser or Ediston	Ediston Properties Limited, a private limited company incorporated in England and Wales with registered number 04910369 which operates under the trading name Ediston Real Estate
Issue price	the price per share at which the New Shares are issued pursuant to the Issues
Listing Rules	the listing rules made by the Financial Conduct Authority under Part VI of FSMA, as amended from time to time
NAV	in relation to a Share, its net asset value on the relevant date calculated in accordance with the Company's normal accounting policies
New Shares	the new Ordinary Shares to be issued by the Company pursuant to the Issues
Offer for Subscription or Offer	the offer for subscription of up to 40 million New Shares (in aggregate with the Initial Placing)
Placing Programme	the proposed programme of placings of New Shares by Canaccord Genuity Limited
Property Portfolio	the direct and indirect property assets of the Group from time to time
Proposals or Issue(s)	the proposed issue of New Shares pursuant to the Initial Placing, the Offer and/or the Placing Programme (as the case may be) as described in more detail in the circular
Resolutions	the resolutions to be proposed at the General Meeting to allot, in addition to any existing authorities, an initial 40 million Shares and to disapply pre-emption rights otherwise applicable to the allotment of those shares under the Proposals
Shareholders	holders of the Ordinary Shares
Shares or Ordinary Shares	ordinary shares of 1p each in the capital of the Company

 

END

 

 

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